Our Economy is Corrupt to the Core. No, It’s Even Worse!

On the morning of Sunday, August 26, the Iranian parliament impeached Finance Minister Masoud Karbasian, removing him from office after only a year on the job. Though the margin was not wide — 137 voted for impeachment, 121 against and two abstained — it was yet another blow to President Hassan Rouhani, and came amidst a deteriorating economy and the rapid fall in the value of Iranian currency following President Trump’s withdrawal from the nuclear agreement.

The parliament session was public, with representatives on both sides of the argument giving commentary on the dismal situation of Iran’s economy, from issues with policy and corruption at high levels to the role of Iranian customs in smuggling goods and rent-seeking behavior that has meant profits for a very few and left the country’s overall economy in shambles.

So what happened during the impeachment proceedings, and what did Iran’s political representatives have to say to Masoud Karbasian and about the economy?

Hossein-Ali Haji-Deligani, representative from Shahin Shahr in Isfahan and a member of the parliament’s Planning and Budget Committee:

“People’s purchasing power has been reduced by 50 percent. The country has been robbed of between nine to 18 billion dollars, and 57 tons of gold and coins have been lost. The dollar, which had equaled 3,800 tomans, has now reached 12,000 tomans. [editor’s note: on the evening of August 26, the official rate for the dollar was 4,202 tomans].The price of a square meter of a house has increased by at least 65 percent to eight million tomans [over $1,900]. Every day, one trillion tomans are added to the liquidity [cash in circulation]. We have the highest liquidity, meaning 6.1 trillion tomans [close to $1.5 billion]. Each month the index for the price of food has increased by around nine percent. During the year that you have been the finance minister, Iran’s rating for business has fallen by four points. In this one year alone, the price of automobiles has increased by between 40 and 50 percent. The price of [Bahar Azadi gold] coins has gone from 1.2 million tomans to over 4 million."

 

Hedayatollah Khademi, representative from Izeh in Khuzestan:

“We witnessed that Aseman Airlines was insured without having paid its premiums for the previous years and this year... the company was supposed to pay 28 billion tomans [close to $6.7 million] in fines. Banks have opened corporations and holding companies with people’s money. What have the banks got to do with buying steel or with petrochemicals? The daughter of an official was sold an automobile worth 350 million tomans [over $83,000] for 250 million [close to $60,000] on a loan with four percent annual interest. What is the 20-something-old son of an advisor to the president doing working for a company under the Finance Ministry? Embezzlement, smuggling and extensive violations are running rampant in the Customs Department. The General Inspection Office has uncovered an organized smuggling operation worth $15 trillion. Why were the Customs’ archives and documents for 2013 and 2014 destroyed in a fire? It is said that the government has increased the price of the dollar to pay its own debts.”

Abbas Papizadeh, representative from Dezful in Khuzestan and a member the parliament’s Agriculture Committee:

“The government has broken the record for printing money. The High Council on Economy opposed raising guaranteed prices for agricultural products, but why did it agree to increase the price of low-quality domestic-made cars? People are forced to pay 36 million tomans [close to $8,600] for the low-quality [made-in-Iran] Pride cars? Is this justice? How can you say that the rate of inflation is eight percent while the price of food items has increased by 100 percent and cars are 300 percent more expensive? Hundreds of containers of glass utensils were smuggled out of Customs. Investors are leaving the country.”

Hassan Norouzi, representative from Robat Karim in Tehran and a member of the parliament’s Judiciary Committee:

“According to the information received, 70 percent of smuggled goods enter the country through official channels.”

Majid Kianpour, representative from Dorud and Azna in Lorestan:

“They print money without backing [fiat currency] and charge people ridiculous interest rates of 23, 27 and 28 percent. The daily interest of bank accounts amounts to 760 billion tomans [$180 million].”

Salam Amini, Representative from Ilam:

“The circle of poverty and deprivation has grown bigger. The middle class is in danger of falling into lower layers of the society. And a great percentage of people who were happy with a piece of bread and cheese are now in danger of losing their daily bread. Many families are falling apart. Many cases are making their way through the judiciary. For young people, buying a home has turned into only a dream.

Ali Sari, representative from Ahvaz in Khuzestan:

“The losses by banks has increased from the astronomical number of 500 trillion tomans [$119 billion] to 700 trillion [$167 billion]. The volume of liquidity has reached 1,530 trillion tomans [over $364 billion], meaning that for the first time it has exceeded our gross national product. Our country’s economy becomes turbulent with a single tweet or threat.”

Mehrdad Lahouti, representative from Langarood in Gilan:

“From August 2017 to August 2018, inflation has risen by 60 percent. Smuggling worth $12.5 has been conducted through official channels and Customs. From the 6,800 automobiles that were illegally ordered, 1,000 have been released by Customs.

Masoud Pezeshkian, representative from Tabriz in East Azerbaijan and First Deputy Speaker of the Parliament:

“They don’t want us to join FATF [the Financial Action Task Force on Money Laundering], but then no bank will deal with us. Much of what is happening today is the result of our wrong decisions. Ask the economists, the producers and the factory owners. They are in trouble because of our decisions.”

Shadmehr Kazemzadeh, representative from Dehloran in Ilam:

“They have set aside $1.5 billion for low-interest loans but people who really need these loans cannot get them. The gold reserves are 60 tons less because they have been sold as coins.”

Ghasem Jasemi, representative from Kermanshah:

“After Venezuela, the most worthless currency in the world belongs to Iran. The real rate of inflation is perhaps over 200 percent. More than a million people have to rebuild after the earthquake [in the province of Kermanshah in November 2017] but with the money that you have earmarked for them, they cannot even procure reinforcing bars and cement. Ten months after the earthquake, not one brick has been placed in most homes and people live in anxiety. Companies that are worth 2,000 billion tomans are being robbed and given to certain people for free.”

Elias Hazrati, representative from Tehran:

“It is predicted that the rate of inflation will hit 40 percent by the end of the year. People feel vulnerable and have nowhere to go. Inflation is such that the poor have become poorer and the middle class is in a worse situation. What have we done to this nation, I ask?”

 

More on the Iranian economy after the US withdrawal from the nuclear deal:

Rouhani's U-Turn to Save Economy, August 10, 2018

Iran Appoints New Bank Governor as Freefall Continues, August 6, 2018

The Fall and Fall of the Iranian Rial, July 31, 2018

The Case of the Lost Euros in Aladdin Bazaar, July 3, 2018

Iran’s Currency in Turmoil — Again, June 25, 2018

When Will US Sanctions Hit Iranian Oil Sales?, May 18, 2018

The Future of Iran’s Economy as the US Bows Out of the Deal, May 10, 2018